SANTA FE, N.M. (AP) — Cities, counties and other local governments could find it harder to get low-cost loans from the New Mexico Finance Authority during the next several months because of fallout from a scandal over a fake audit of the agency's finances.

The authority's governing board reviewed a proposal Thursday for limiting a loan program that finances projects such as sewers, roads and other infrastructure in communities.

The authority can only make loans using $37 million in cash reserves because it's unable to issue new bonds without a final audit or tap into a $50 million line of credit previously arranged with a bank. Bonds are the primary way the authority finances projects and has money to lend.

At issue in the unfolding scandal are the authority's financial statements, which were faked to indicate they had been audited by an outside accounting firm. Investors may have relied on the financial information in considering whether to buy the authority's bonds earlier this year.

Authority officials have blamed a former controller for the fake audit, which was disclosed earlier this month. The former employee, who left in June, has acknowledged putting together the fake audit but said there's no money missing and the financial figures in the report were correct.

Authority CEO Rick May said an outside auditor can't prepare a final audit for 2011 until an investigation is completed of the falsified document. The board is working with the state auditor's office to hire a firm to do the investigation and a "forensic audit" to determine how the fake audit happened and verify whether there's any money missing. It's uncertain how long the investigation might take, but board members said they hope it could be completed in as little as 60 days.

However, until the authority can resume issuing bonds, it has only a limited amount of money to provide financing for local governments.

The authority on Thursday postponed decisions on several large pending projects. Among those put on hold were $27 million sought for infrastructure, such as sewer, water and other utility services, in a special assessment district in northwestern Albuquerque that would clear the way for future development of homes in a subdivision. The board agreed to several smaller loans, such as $48,000 for an engineering report for a local government district that provides drinking water in rural Taos County.

The authority's staff proposed that loans be kept to less than $5 million and go for new infrastructure projects rather than refinancing of previous loans made to communities. The board will vote on the proposed restrictions at a meeting early next month.

"We are hoping that this scale back of loan activity is temporary," authority CEO Rick May said.

The proposed restrictions are intended to ensure that low-cost loans remains available for smaller communities and local governments that otherwise will have a hard time obtaining financing through banks or the private financial markets.

Based on the proposed restrictions and the amount of past lending, staff estimated the authority might be able to continue making loans for six to eight months using the $37 million.

"We're just trying to do the best we can with the resources that we have," May said after the board meeting.

The authority is not under the direct control of any state agency but is governed by a board of directors, with a majority appointed by the governor.

National credit rating agencies are considering whether to downgrade the authority's bond ratings because of the fake audit. A lower credit rating would increase the costs of borrowing for local governments that need loans from the authority. The authority's financing is separate from bonds issued directly by state government using tax revenues to retire the debts.